Good workers in demand
13 March 2024
Is a smaller pool of available labour, and particularly of skilled workers, leading to a weaker recovery than might otherwise be the case?
That’s one of the suggestions made by the Institute of Employment Studies in analysing the latest labour market statistics released yesterday by the Office for National Statistics.
The figures showed employment is broadly flat and unemployment still low at below 4%, but economic inactivity is well above pre-pandemic levels, with an astonishing 700,000 more people outside the labour force than there were four years ago, before the Covid-19 pandemic.
The IES says this could reflect weaker demand as a result of higher interest rates and living costs, but it has not fed through into higher redundancies or unemployment. The organisation believes that if anything labour and skills shortages are holding back what should be a stronger recovery.
What it refers to as ‘higher worklessness’ is particularly due to more older people and younger people being out of work. For older people this is reversing the trend over recent decades of an ageing population leading to larger increases in employment than economic inactivity, with older women in particular faring worse, the IES says.
Amongst young people, one in seven is now outside full-time education or employment, the highest rate in nearly a decade. More of this age group are out of work with long-term health conditions, and there is weaker growth in education participation among young men.
Vacancies continue to fall back but remain well above pre-pandemic levels, at just over 900,000, while short-term unemployment has dropped a little in the last six months after rising last year.
Other analysts are highlighting a number of competing factors. On one hand, inflation is falling which lead many to think that the Bank of England will start to cut interest rates sooner rather than later. But on the other, employers are having to retain and attract competent and skilled workers with competitive remuneration – which could drive inflation back up.
Indeed, the labour statistics show that pay growth continues to be reasonably strong, with regular pay rising by close to 6% year-on-year and ‘real’ pay after inflation growing by close to 1.5%.
The IES says this clearly shows the need for greater focus on reaching, engaging with and supporting people who are not yet looking for work but would want to work with the right support.
Employers also have a key role to play, both to help people stay in work and to bring more people back into the labour force. This means looking at the drivers of decent work and well-being, which include job security, good relationships at work, two-way flexibility, empowerment and ready support when things go wrong.
The hire industry has previously shown its awareness of such issues and has taken positive steps to address them. Just two examples are the CPA’s Stars of the Future initiative highlighting the skills of young plant apprentices, and One Stop Hire’s foundation of a dedicated training academy for new recruits.
These are laudable developments. But the industry might need more of them to tackle future labour shortages.
Photo: Alexander Stein/Pixabay
